DEBT TO EQUITY RATIO

SOLVENCY ANALYSIS
DEBT TO-EQUITY RATIO

ROSYANA

361 10 036

     ACCOUNTING DEPARTMENT

      STATE POLYTECHNIC OF UJUNG PANDANG

               2013

A.      What is financial statement analysis?

Financial statement analysis is one of the task financial manager as internal party who is responsible for the company’s financial statement.

B.       Scope of Financial Statement Analysis

1.        Liquidity Analysis;

2.        Solvency Analysis;

3.        Profitability Analysis;

4.        Cash Flow Analysis;

5.        Bankruptcy Analysis;

6.        Risk Analysis;

7.        Investment Analysis.

C.      Solvency Analysis

Analysis of solvency is an analysis of the company's ability to meet all its obligations, both short-term liabilities and long term liabilities.

D.      Solvency Analysis

E.   Solvency Analysis Formula

1.    Time interest earned = Earnings before income taxes plus interest expense / Interest expense

2.    Debt-to-equity ratio = Total liabilities / stockholder 's equity

3.   The ratio of cash flow to total debt = Operating cash flow / total debt

4.    RHJPE = Long-term debt / total equity

5.    RHJPDTH = Short-term debt / total debt

F.    Debt to-Equity Ratio

On this policy, management can sell assets, especially long-term assets are not productive, then the sale of these assets are used to reduce or buy shares that circulating . The Formula for this ratio is:

G.   Financial Report

The Example:

 

The Financial Statement 2008

The Financial Statement 2009

H.  Conclusion

1.        Based the Calculation, in 2009, the composition of debt and equity is 1.99. This shows that every Rp 1.00 equity is equal with Rp 1.99 Debt . So when the company went into liquidation, there is still excess equity over debt that must be covered.

2.        Results of these calculations indicate that in 2008, the company was likely not solvable because debt financing is greater than equity financing.